Proper evaluation of cost-quality trade-offs inherent in regulatory policy requires identifying the structure of production from the behavioral response of quality to the policy change. However, estimating the structure of production with endogenous quality is difficult because of both measurement problems and data availability. We develop a simple method for identifying and estimating cost functions in the presence of endogenous and unobserved quality. Using this method, we estimate that a quality-adjusted cost function for nursing homes treating quality as exogenous yields seriously misleading estimates of marginal cost and economies of scale. We then used the parameter estimates to evaluate the cost-quality trade-off in nursing home regulatory policy.

In this paper I show that the Medicaid program can improve the access of financially indigent patients to nursing home care by raising the rate of return paid on Medicaid patients' care, but only at the cost of lower quality of care. To quantify the policy tradeoff, I derive expressions for the elasticity of access with respect to total Medicaid expenditures and the elasticity of access with respect to quality. These elasticities expressions are complicated by the fact that Medicaid payment formulas are cost based and, therefore, depend on the quality choices of nursing homes. Using New York State data, I find that a 10% increase in Medicaid expenditures induces a 4.1% increase in Medicaid patient care but also reduces nursing home expenditures on patient services by about 3.4%.

Proper evaluation of cost-quality trade-offs inherent in regulatory policy requires identifying the structure of production from the behavioral response of quality to the policy change. However, estimating the structure of production with endogenous quality is difficult because of both measurement problems and data availability. We develop a simple method for identifying and estimating cost functions in the presence of endogenous and unobserved quality. Using this method, we estimate that a quality-adjusted cost function for nursing homes treating quality as exogenous yields seriously misleading estimates of marginal cost and economies of scale. We then used the parameter estimates to evaluate the cost-quality trade-off in nursing home regulatory policy.

The paper analyzes the effect of agricultural tenancy laws offering security of tenure to tenants and regulating the share of output that is paid as rent on farm productivity. Theoretically, the net impact of tenancy reform is shown to be a combination of two effects: a bargaining power effect and a security of tenure effect. Analysis of evidence on how contracts and productivity changed after a tenancy reform program was implemented in the Indian state of West Bengal in the late 1970s suggests that tenancy reform had a positive effect on agricultural productivity there.

We study household decisions to acquire energy-using assets in the presence of rising incomes. We develop a theoretical framework to characterize the effect of income growth on asset purchases when consumers face credit constraints. We use large and plausibly exogenous shocks to household income generated by the conditional-cash-transfer program in Mexico, Oportunidades, to show that asset acquisition is nonlinear, depends, as predicted in the presence of credit constraints, on the pace of income growth, and both effects are economically large among beneficiaries. Our results may help explain important worldwide trends in the relationship between energy use and income growth.

This study argues that economic vulnerability causes citizens to participate in clientelism, a phenomenon with various pernicious consequences. To examine how reduced vulnerability affects citizens’ participation in clientelism, we employ two exogenous shocks to vulnerability. First, we designed a randomized control trial to reduce household vulnerability: our development intervention constructed residential water cisterns in drought-prone areas of Brazil. Second, we exploit rainfall shocks. We find that reducing vulnerability significantly decreases requests for private goods from politicians, especially among citizens likely to be in clientelist relationships. Moreover, reducing vulnerability decreases votes for incumbent mayors, who typically have more resources for clientelism.